Net profit at Bank of Baroda rose by 41.4% year-on-year (y-o-y) in the December quarter, but part of the growth is due to a one-time profit on the winding up of the Bank’s Hong Kong subsidiary. Minus that, profit after tax is Rs662.78 crore, 32.3% more than in the year-ago period.
The main reason for the rise in profits has been higher lending and global advances, up 33.2% y-o-y at December-end. In the December quarter, loans outstanding rose by Rs7,724 crore while deposits rose by Rs7,547 crore, indicating an incremental credit-deposit ratio of a huge 102%.
Despite the pace of credit expansion, the bank has lowered its bad loans, with gross NPAs (non-performing assets) falling while the net NPA ratio improved to 0.37% at end-December compared with 0.43% at end-September.
Net interest margins too went up and the combination of margin growth and frenetic loan growth led to net interest income rising by 46.6% y-o-y. Higher treasury income and increased fee income, too, boosted profits. Operating profit, after adjusting for exceptional items, was up 44.3% y-o-y. That’s still well above the 32.7% y-o-y growth in operating profit in the September quarter. Net profit growth was lower because of a sharp rise in provisions that the bank attributes to higher provisions on its investment book.
The results beat estimates and the stock rose rising 4% in a weak market. But the bank is still growing too rapidly in a hostile environment and a deceleration in loan growth may be a prudent move.
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